SEC to investigate KBR’s fraud-cover-up practices

In February, a former employee sued Halliburton Co. and its former subsidiary, Kellogg Brown & Root (KBR) for violating the federal False Claims Act and other regulations that shield whistleblowers. The resulting case has now been taken up by the Securities and Exchange Commission which has opened an investigation into the groups.

The lawsuit centers around claims that KBR requires employees seeking to report fraud sign confidentiality agreements which prevented them from discussing their claims with prosecutors and investigators, according to The Washington Post. Those involved on the plaintiff side say that collecting confidentially statements from employees has been a routine operation of KBR’s for some time. The investigation will evaluate how extensively KBR has used those statements to cover up fraud allegations.

When a federal judge ruled in early March that the confidentiality statements that KBR employees were forced to sign must be made available to lawyers on the case working for the whistleblower, KBR attempted to have the ruling sealed. The Post’s report quotes Stephen M. Kohn, an attorney for the whistleblower saying, “I’ve been notified that the SEC is opening an investigation into these practices at KBR. There is an overriding public interest for the SEC to stop these practices, not just by KBR, but by any publicly traded company that might be using the attorney-client privilege to cover up fraud.”

KBR had claimed that the confidentiality statements are internal files of a nature that are protected under attorney-client privilege regulations, and that disclosure would violate those protections. U.S. District Judge James S. Gwin dismissed that claim on the part of KBR, and ordered that the confidentiality agreements be turned over to lawyers.

KBR has performed over a decade of defense work for the U.S. — becoming the largest American contractor operating in Iraq and Afghanistan through 2011, according to The Post.